Structural Change and Labor Requirement of the Japanese Economy

This paper extends the framework of input–output decomposition analysis into a model which decomposes changes in the labor requirement of an economy into effects of occupational substitution, changes in labor productivity and changes in material inputs. By application of this model to the Japanese experience it was found that the most important characteristic of the evolution of the Japanese labor force in the period 1975–85 was the replacement of blue collar workers by highly skilled professionals and technicians. Both technical change and changes in the structure of final demand fostered the increasing demand for professionals and technicians. As the mix of employment shifted towards high knowledge level occupations, Japan's labor productivity increased sharply.